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Should they stay or should they go? Reactivation and Termination of Low-Tier Customers: Effects on Satisfaction, Word-of-Mouth, and Purchases

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  • Bijmolt, Tammo H.A.
  • Blömeke, Eva
  • Clement, Michel

    (Groningen University)

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    Abstract

    Many companies face the problem of having a substantial number of low-tier customers ? clients at the bottom of the customer pyramid. For this segment, it is necessary to either reactivate or terminate the customer relationships to increase profitability. Managers seek to learn more about marketing actions targeted towards low-tier customers and their response towards these actions. Therefore, we conducted a large field experiment in which we implemented a ?last call? marketing action for a large sample of low-tier customers of a catalogue retailer (N = 12,000). The action aims at sales reactivation, but in case a customer should not react, the relationship will be terminated. We measure customer response in terms of satisfaction, (positive and negative) word-of-mouth, and purchase behavior. We find no harmful effects from relationship termination, such as dissatisfaction or negative word-of-mouth. The results indicate that the ?last call? marketing action reactivates a small fraction of the low-tier customers. These customers remain active in the months following the action period. We discuss managerial implications of our findings and future research on low-tier customer segments.

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    File URL: http://irs.ub.rug.nl/ppn/330737317
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    Bibliographic Info

    Paper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 10008.

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    Date of creation: 2010
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    Handle: RePEc:dgr:rugsom:10008

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    1. Homburg, Christian & Hoyer, Wayne & Stock-Homburg, Ruth, 2007. "How to Get Lost Customers Back? Insights into Customer Relationship Revival Activities," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 35535, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    2. David Godes & Dina Mayzlin, 2009. "Firm-Created Word-of-Mouth Communication: Evidence from a Field Test," Marketing Science, INFORMS, vol. 28(4), pages 721-739, 07-08.
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    7. Franses,Philip Hans & Paap,Richard, 2001. "Quantitative Models in Marketing Research," Cambridge Books, Cambridge University Press, number 9780521801669, October.
    8. David C. Schmittlein & Donald G. Morrison & Richard Colombo, 1987. "Counting Your Customers: Who-Are They and What Will They Do Next?," Management Science, INFORMS, vol. 33(1), pages 1-24, January.
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